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And so that was our strategy. And we built the company long term. And the ultimate way we won is, we had a better community. He couldn’t understand community. And I think we had a better product.
In 2012, at a rental in Spain, the future international managers got together to start writing the playbook for the “Invasion of Europe.” They would launch each region with a PR blitz, with an integrated marketing campaign featuring press, Facebook ads, email, and other touchpoints. They would launch seven offices over four months. All the new localized websites would launch in coordinated fashion.
it’s tempting to take on a fast-growing startup with a Big Bang Launch—maybe a big, glitzy, media-driven announcement like the type that Steve Jobs made famous. Google+ is the quintessential case study, as they pursued Facebook. Yet these end in “Big Bang Failures” when the networks end up diffuse, weak, and prone to collapse.
The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors.
The same can be said for a networked product like Slack, Dropbox, or Google Suite, which are mostly used internally within company—the moat generally just applies there—whereas Zoom’s network has a deep, overall moat, as it’s used by participants connecting across companies.
First, I’ll tell you what it’s not: it’s certainly not a contest to see who can ship more features.
Instead, it’s often the dynamics of the underlying network that make all the difference.
Rarely in network-effects-driven categories does a product win based on features—instead, it’s a combination of harnessing network effects and building a product experience that reinforces those advantages.
And more recently, collaboration tools like Notion and Zoom are succeeding in a world where Google Suite, WebEx, and Skype already have significant traction.
It isn’t true—simply having network effects is not enough, because if your product has them, it’s likely that your competitors have them, too.
the good news is, your product has network effects. But the bad news is, so does your competition. It’s how you grow and scale your network that matters.
MySpace, Bebo, Hi5, Tagged, and a dozen others—all looked to be growing like weeds. But as the market matured, competition turned zero sum. Cold Start Theory predicts that competition creates
Sometimes the network goes to zero (or nearly so), and sometimes it ends up as a much smaller atomic network—a niche that it can hold on to, but as a shell of its former self.
Trying and failing many times is part of the startup journey—it only takes the discovery of one atomic network to get into the market. With that, a startup is often able to start the next leg of the journey, often with more investment and resources to support them.
taking. I saw this firsthand at Uber, whose entrepreneurial culture shifted in its later years toward profitability and coordinating the efforts of tens of thousands. This made it much harder to start new initiatives—for better and worse.
In a network representing thousands of such diverse communities, there are always a few that get underserved.
The initial starting point matters because some are more easily able to access network effects.
However, constraining the product to photo communication meant that Snapchat could cherry-pick the one highest-frequency and stickiest use case—driven by ensuing back-and-forth communication—that would quickly amplify stickiness as new users were added.
By picking the right entry points, these new startups were spring-loaded to quickly reach an atomic network quickly, and then scale up with multiple network effects.
But counterintuitively, for networked products, this is often a trap. It’s exactly the wrong way to build a network, because a wide launch creates many, many weak networks that aren’t stable on their own.
While this might superficially look like a large user base, it actually consisted of many weak networks that weren’t engaged, because most new users showed up and tried out the product as they read about it in the press, rather than hearing from their friends.
The fate of Google+ was sealed in their go-to-market strategy. By launching big rather than focusing on small, atomic networks that could grow on their own, the teams fell victim to big vanity metrics.
Eventually the collection of weak networks and high churn caught up, and in 2019, Google+ finally shut down after years of meandering irrelevance.
Without a breakthrough for the hard side of the network, Google+ wouldn’t get the unique content to differentiate from other platforms.
Snap famously grew within the high school segment before breaking out into the mainstream, and the ephemeral photos captured a whole unique set of content that had never been published—casual, unposed photos that were meant for communication.
The weakness of media coverage, conferences, or advertising is that while it might generate a large spike of users when successful, it is necessarily untargeted. Instead you are likely to get a smattering of users from across many networks, which might then churn out if the network around them isn’t built.
Contrast that to the Big Bang Launch, which can present distracting, confusing aggregate information on an increasing total number of users that might go up without viral growth also improving.
You’d rather have a smaller set of atomic networks that are denser and more engaged than a large number of networks that aren’t there.
When networks are built bottom-up, they are more likely to be densely interconnected, and thus healthier and more engaged. There are multiple reasons for this: A new product is often incubated within a subcommunity, whether that’s a college campus, San Francisco techies, gamers, or freelancers—as recent tech successes have shown.
Once a new networked product is spreading via word of mouth, then each user is likely to know at least one other user already on the network. By the time it reaches the broader consciousness, it will be seen as a phenomenon, and top-down efforts can always be added on to scale a network that’s already big and engaged.
The objection is that, by itself, the first network often looks like a tiny market that doesn’t deserve the attention.
To build a massive successful network effect, I argue that you must start with a smaller, atomic network.
A product’s first network is unlikely to be its last, when the team is working furiously to refine its network forces to conquer adjacent markets and networks.
the fallacy in believing in winner-take-all markets—instead, products compete as networks of networks, so that even when Uber’s network was bigger in aggregate, it was only 50/50 in cities like San Francisco and Los Angeles against Lyft.
based, not graphical—and they just sucked. To
create a successful bundle for Office, you needed Word, Excel, and PowerPoint to be great, and then they could be combined with established distribution.
For consumer mobile apps, bundling new features to compete with Snapchat Stories, TikTok, or other popular apps has generally come with the downside of adding clutter to the design.
It is part of the Silicon Valley circle of life that this happens—that tiny, high-energy startups eventually grow to be large and unwieldy, and the most entrepreneurial employees go on to spread their know-how, money, and energy into brand-new companies.
The network effects that drove Uber are highly relevant to many products in the technology industry, and this means that as technology transforms the world at large, network effects will become central across product categories, geographies, and industries.
crypto becoming infused into every aspect of software. This will redefine gaming, social networks, marketplaces, and many other product categories, so that every software developer will have to think about network effects as part of building products.
